This traditional southern put-down came to mind as a I read Matthew Yglesias’ posts (yesterday and today) on the presumed link between wealth, on the one hand, and competence and innovation, on the other.
- Exhibit A: Big Business may retard technological progress. Alexander J. Field argues that the 1930s were the “most technologically progressive” decade in U.S. economic history. Because the economy was running below capacity for most of this period, the assertion seems unlikely at first. But as Yglesias suggests, government intervention to raise the cost of labor (and avoid deflation) created an incentive to invest and adapt to make labor more productive. Whereas the default position of business, when left to itself, is to resist the risks of innovation and increase profits by suppressing wages and benefits, by shrinking the workforce, and by moving plants to cheaper labor markets, thus treating workers as just another raw material or input.
- Exhibit B: Big Business uses its clout with government to bring about policy measures that fail to look beyond immediate gains. From 1996 to 2006, Congress told the FDIC to stop collecting insurance premiums from banks. Now depositors may not be covered in case of a series of bank failures. Citibank, which owes its continuing existence to injections of public cash, has been plotting to halt reform of our bizarre labor laws — because everyone knows that raising wages is always a Bad Idea™.
- Exhibit C: Big Business changes its core principles whenever these conflict with the pursuit of short-term gain. Milton Friedman’s monetarism has been popular since the Nixon era for counseling that government be generous to business while requiring “austerity” from everyone else. Now that even monetarist orthodoxy calls for government intervention to stimulate the economy, business pundits are abandoning Friedmanism and moving to the fringe — even preferring the flattering fiction of Ayn Rand to the disappointing reality we live in.
By “Big Business” I mean business corporations organized to “internalize profits and externalize costs.” Far from being guided by facts and logic, as one might well assume, business corporations have (as Barbara Ehrenreich observed in Bait and Switch) “a culture addicted to untested habits, paralyzed by conformity, and shot through with magical thinking.”